Currency update – the Chinese renminbi

Despite the CNY's recent fall, we believe the People's Bank of China will refrain from competitive devaluation

Following US President Donald Trump’s announcement of a new 10% tariff on USD300 billion of Chinese goods, the Chinese renminbi (rmb) weakened sharply and breached CNY7.00 per USD.

The recent rmb move, in our view, represents a major shift in the People’s Bank of China’s (PBoC) currency policy, reflecting the deteriorating outlook for trade negotiations with the US and the resulting additional downward pressure on the Chinese economy.

Consequently, we have decided to change our forecasts for the rmb against the US dollar to CNY7.10 per USD for the entire time horizon (three, six and twelve months) from CNY6.95 per USD previously. However, we do not believe it is in China’s best interest to engineer a massive devaluation of its currency either, on concerns of triggering financial risks.

Read full report here

Comments are closed.